Dividend nil-rate

An outline of the changes to the rules regarding dividends.

Ling Phipp can help taxpayers in the Nottingham area with queries you have regarding dividends – here is an overview of the new Dividend Allowance scheme...

A person does not have to pay tax on the first £2,000 of dividend income, regardless of the level of non-dividend income. Tax is charged on dividends received over £2,000 at the following rates:

  • 7.5% on dividend income within the basic rate band
  • 32.5% on dividend income within the higher rate band
  • 38.1% on dividend income within the additional rate band.

The Dividend Allowance does not reduce total income for tax purposes, and dividends within the allowance still count towards the appropriate basic or higher rate bands. They may therefore affect the rate of tax payable on dividends received in excess of the £2,000 allowance.

Example 1

This is a quite straightforward example, based on 2018-19 tax rates and allowances, showing the taxable amounts after allocating the relevant allowances to the two types of income.

  Non-Dividend Income
£
Dividend Income
£
  18,000 22,000

Dividend Allowance

- 2,000
Personal Allowance 11,000 -
Taxable at basic rate 7,000 (20%)

20,000 (7.5%)

Example 2

This example is more complicated, in that it splits the dividend allowance into two - £1,500 to use up the balance of the basic rate band and £500 to 'eat into' the higher rate band.

  Non-Dividend Income
£
Dividend Income
£
  44,850 9,000
Personal Allowance 11,850 -
Dividend Allowance to basic rate limit - 1,500
Dividend Allowance higher rate band - 500
Taxable at basic rate 33,000 (20%) -
Taxable at higher rate - 7,000 (32.5%)

Ling Phipp can advise businesses in the Nottingham area on a range of tax issues relating to dividends. Please contact us for more information.

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About us

Ling Phipp was founded in 1974 and nowadays has two partners, six managers plus trainees and support staff.

We serve clients in the East Midlands and all over the UK. Our out-of-town location, with easy parking, close to the M1 junction 25 (Nottingham/Derby - A52), is very convenient.

Company details

0115 949 6838

Ling Phipp, Cliffe Hill House, 22-26 Nottingham Road, Stapleford, Nottingham NG9 8AA


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